The Department of Consumer Affairs has recently notified[1] the Consumer Protection (E-Commerce Rules, 2020) hereinafter referred to as the ‘Rules of 2020’ which are made applicable to (i) an e-commerce entity operating in India and also (ii) an e-commerce entity which ‘systematically offers’ goods and services to consumers in India. Due to the growth of e-commerce activities in India and the problem faced by the consumers, the Government has tried to plug in the loopholes in the existing rules and regulations. These Rules are in tune with the new Consumer Protection Act, 2019 (‘CPA’) and have addressed issues which would ensure compliance and also deter the e-commerce companies from indulging in unfair trade practices while protecting the rights of the consumers at the same time.

  1. Applicability

The Rules have been made applicable on the following: –

  1. all goods and services bought or sold over digital or electronic network;
  2. all e-commerce retail, including multi-channel single brand retailers and single brand retailers in single or multiple formats; and
  3. all models of e-commerce.

However, any natural person carrying out any activity in a personal capacity not being part of any professional or commercial activity undertaken on a regular basis is kept outside of the ambit of application of these rules. The Rules have expanded the ambit of the applicability of these rules to all kinds of e-commerce entities and activities relating to a consumer.[2]

  • E-Commerce Entity Requirements
  1. An e-commerce entity must be a company registered under the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013) or a foreign company covered under clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) or an office, branch or agency outside India owned or controlled by a person resident in India as provided in sub-clause (iii) of clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999). By virtue of Rule 4 only specific type of body corporates are allowed to operate in the sphere of e-commerce entities and individuals, partnerships, proprietorships are excluded.[3]
  2. Further, an important addition in the Rules of 2020 is the mandatory requirement to appoint a nodal person or a senior designated official (resident in India) who would be responsible compliance of the CPA as well as the Rules.[4]
  1. Under the new Rules, now an e-commerce entity must provide the following information on their platform:-
    1. the legal name of e-commence entity;
  1. principal geographic address of its headquarters and all branches;
  2. name and details of its website; and
  3. contact details, including mobile numbers of customer care and grievance officer to help users make an informed decision.[5]
  4. The entities have to establish a Grievance Redressal Mechanism which involves the following steps:-
    1. A Grievance Officer must be appointed to monitor the grievance redressal mechanism, and the following details of the grievance officer must be displayed on the e-commerce platform:
      1. name;
      1. contact details; and
      1. designation of such officer on the e-commerce platform.[6]
    1. Once appointed the Grievance Officer must ensure that do the following:-
      1. acknowledge the complaint of the consumer within 48 hours; and
      1. act on the complaint with 1 month from the date of receipt of the complaint.[7]
  • In the case where imported goods or services for sale are involved the following information must be provided:-
    • the name and details of such importer; or
    • anyone who may be a seller on the platform[8].
  • E-commerce entities have now been specifically barred from charging any cancellation fees from consumers who cancel their orders after confirming purchase unless similar charges are borne by the e-commerce entity if they cancel the purchase order unilaterally for any reason[9]. The Rules have tried to balance between the interest of the e-commerce entities and consumers.
  • The e-commerce entities must record only the explicit consent of the consumers for the purpose of purchase of any goods or services offered on the platform. It is pertinent to note that pre-ticked checkboxes do not confirm the consent of the consumer.[10] This rule is in line with the judgment of the Hon’ble Supreme Court in K.S Puttaswamy vs. UOI – (2017) 10 SCC 1 and protects the right to privacy of the consumer.
  • They must make sure to give effect to the refund requests of the consumers within a reasonable time period as mandated by the RBI or prescribed under applicable laws[11].
  1. Under the new Rules, manipulation of price is strictly prohibited. Discrimination between consumers of same class is also prohibited[12].
  2. Marketplace E-Commerce Entity

A marketplace e-commerce entity[13] acting as an intermediary under the Information Technology Act, 2000 has been provided protection under the Rules provided it complies with sub section 2 &3 of Section 79 of the Information Technology Act and the Information Technology (Intermediary Guidelines) Rules, 2011[14].

Market e-commerce entity is required to take an undertaking from its sellers that the product description is true and correct.[15]

Under the rules, details must be provided about the sellers, including the name of their business, whether registered or not, geographic address, customer care numbers, any rating, or feedback on the platform in a clear and accessible manner to help the consumers make informed decisions. It has been mandatory that a ticket number be provided ticket for each complaint for consumers to help track the status of their complaint, information pertaining to refund, return, exchange, warranty & guarantee, delivery and shipment, modes of payment, grievance redressal mechanism, and any other information required by consumers to make informed decisions.

The Rules lay down that the nature of relationship with sellers must be displayed in the terms & conditions on the platform. Further, a record must be maintained of all the sellers, including those previously removed or restricted to offer goods or services on the platform to enable consumers to make informed decisions.

  • Sellers on the Marketplace

Rule 6 lays down the responsibilities of sellers[16] in an e-commerce transaction. A seller offering goods or services on e-commerce entities, shall strictly refrain from impersonating as a consumer to post reviews about goods or services, or misrepresenting the quality of the features of any goods or services[17]. A seller cannot refuse to take back goods or withdraw or discontinue services purchased or agreed to be purchased, or refuse to refund paid amount, if goods or services are defective, deficient or spurious, or do not conform to the advertised features, or agreed delivery schedule[18]. A longstanding demand of the consumer protection groups has been addressed regarding posting of fake reviews. These rules would ensure that the sellers don’t indulge in Unfair Trade Practices, however, there is still scope for the seller to engage third parties and post fake/ misleading reviews about the products.

A seller needs to have prior written contracts with the marketplace e-commerce entity through which it intends to sell its goods or services[19]. Now it is mandatory that a grievance officer for redressal of consumer’s complaint is appointed by the seller and the seller has to be ensured that the officer acknowledges the complaint within 48 hours from its receipt and acts upon it within 1 month from the date of receipt of the complaint.[20]

Another concerning issue regarding misleading advertisements has been addressed in the new rules. Advertisements of the goods or services offered are required to be consistent with the actual characteristics of such goods or services[21]. Legal name, geographic address of headquarters and all branches, the name and details of the website, contact details, including customer care number, and applicable GSTIN and PAN details to the marketplace e-commerce entity must be displayed on the platform.[22]

The seller needs to disclose and display through the marketplace e-commerce entity all contractual information, total price of the goods or services along with breakup, postage & handling charges, conveyance charges, and applicable taxes. The seller needs to disclose all the mandatory notices, relevant details about the goods or services, including country of origin and expiry date of the goods or services, accurate information related to terms of exchange, returns, and refunds, including cost of return shipping, and any relevant guarantees or warranties applicable on the goods or services.[23]

  • Inventory E-Commerce Entity

Rule 7 deals with duties and liabilities of inventory e-commerce entities[24] which are similar to those of sellers on the marketplace. This rule ensures that there is consistency maintained on the information which is provided to the consumer by the e-commerce entity, the sellers as well as inventory holders.

  • Contravention

Rule 8 states that the provisions of the Consumer Protection Act, 2019 (35 of 2019) shall apply for any violation of the provisions of these rules.

The rules are in the right direction to safeguard the interests of the Consumers, however, their implementation would be the biggest challenge for the government.